Share Buyback Limit in the Companies Act To Increase

The limit on the total number of a company’s issued ordinary or preference shares that a company may buy back under the Companies Act will be raised from 10% to 20%. The change will take effect from 1 Oct 2013.

2. The increase in limit will allow a Singapore-incorporated company to have greater flexibility in buying back its shares. The move towards greater flexibility takes reference from the company law in other jurisdictions, for example, the United States, Canada, United Kingdom and Hong Kong, which do not impose share buyback limits.

3. Notwithstanding the increase in the limit, companies must conduct their share buyback in accordance with the requirements in the Companies Act designed to safeguard the interests of shareholders and creditors. These include the need to obtain shareholders’ approval, meet solvency test, and provide adequate disclosure to shareholders.

4. While the new 20% limit applies to all companies incorporated in Singapore, SGX-listed companies will continue to be subject to the existing 10% limit, which is now stipulated in SGX’s listing rules. This approach is consistent with the practices in other jurisdictions where listed companies are subject to a tighter share buyback limit imposed by exchanges through their listing rules, instead of through the company law.

Background

5. Section 76B of the Companies Act allows a company to buy back ordinary shares and preference shares if the buyback is permitted by its articles and approved by shareholders, amongst other requirements. The share buyback limit is currently 10% over the period between consecutive annual general meetings.

6. As part of the ongoing review of the Companies Act, MOF will be seeking public feedback on additional proposals relating to the share buyback regime in the coming weeks.

MINISTRY OF FINANCE
30 Sep 2013